On May 2, 2013, a New York state appeals court issued an order upholding a local ordinance banning all activities related to the exploration for, and production or storage of, natural gas and petroleum in the Town of Dryden, New York. The court affirmed the judgment of the lower court, entered on February 22, 2012, which held that certain amendments to the Town of Dryden zoning ordinance are not preempted by New York State’s Oil, Gas and Solution Mining Law (“OGSML”).

The appeals court also issued an order upholding a local ordinance banning natural gas drilling in the Town of Middlefield, New York. The court affirmed the judgment of the lower court, entered on August 8, 2012, which held that the Town of Middlefield’s zoning law was not preempted by the OGSML.

The two lower court opinions are discussed in our prior blog post on February 29, 2012, Two New York State Courts Uphold Local Bans on Hydraulic Fracturing.

Town of Dryden

 
On August 2, 2011 the Town of Dryden amended its zoning ordinance to “ban all activities related to the exploration for, and production or storage of, natural gas and petroleum,” which effectively banned all hydraulic fracturing in the area.

Anschutz Exploration Corporation, a driller and developer of oil and gas wells that owned leases covering approximately 22,200 acres in the Town of Dryden, then filed a declaratory judgment action seeking invalidation of the zoning amendment on the ground that it was preempted by the OGSML.

The lower court ruled in favor of the town, holding that the legislative intent of OGSML was not to preempt local zoning authority. Instead, the purpose of OGSML is to “regulate any development or production of such resources which may occur in a manner that prevents waste, permits greater ultimate recovery of oil and gas, and protects the correlative rights of all persons.”

On appeal, the appellate court affirmed the ruling of the lower court. The appellate court found that the zoning ordinance “does not seek to regulate the details or procedure of the oil, gas and solution mining industries. Rather, it simply establishes permissible and prohibited uses of land within the Town for the purpose of regulating land generally.” The court acknowledged that the zoning ordinance will inevitably have an incidental effect upon the oil and gas industry. Nonetheless, the court found that the OGSML does not preempt a municipality’s authority to enact a local zoning ordinance banning all activities related to the exploration for, and the production or storage of, natural gas and petroleum within its borders.

Town of Middlefield

 
In June 2011, the Town of Middlefield enacted a new zoning law that categorized all oil, gas and solution mining and drilling as prohibited land uses within the town, which effectively banned all oil and gas drilling within the geographical borders of the township.

Cooperstown Holstein Corporation (“Cooperstown”), a company that owns oil and gas leases on real property in the Town of Middlefield, then filed a declaratory judgment action seeking a declaration that the zoning ordinance was preempted by the OGSML.

The lower court ruled against Cooperstown, holding that the zoning law was not preempted by the OGSML. The court looked to the legislative intent and history of the OGSML to determine that it “does not serve to preempt a local municipality such as defendant from enacting land use regulation within the confines of its geographical jurisdiction and, as such, local municipalities are permitted to permit or prohibit oil, gas and solution mining or drilling on conformity with such constitutional and statutory authority.”

The appellate court agreed with the lower court, affirming the court’s judgment that the Town of Middlefield’s zoning law is valid.

Both decisions are expected to be appealed.
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This article was prepared by Heather M. Corken (hcorken@fulbright.com or 713 651 8386) from Fulbright’s Environmental Law Practice Group and Barclay Nicholson (bnicholson@fulbright.com or 713 651 3662) from Fulbright’s Energy Practice Group.